Texas— 1st deal. Trying to decide if it is necessary to form LLC or other entity. I am being told by a mortgage broker that it can’t be done. The deal has to be done in individual names even if there are more than one. I don’t understand why. The property I am interested in is a bank owned deal. I plan to purchase several rental homes this year with one already under my belt. Can I just do the deal in my name and then transfer it to an LLC. Anyone know why they will not finance the property in the name of any entity?
Chances are that the mortgage broker can only do residential consumer loans. These loans are only made to individuals. Even though the loan is for the purchase of residential property, a loan to an LLC (a loan to a business) is a commercial loan.
Perhaps this explains the mortgage broker’s reaction, though Texas does seem to have some unique laws where real estate financing is concerned.
Thanks, She did mention something about commercial loans being a min. of 500k, and no she does not do commercial loans. I have read a lot of conflicting comments on whether it is advantageous or necessary to form a LLC. Anyone know if I can transfer the properties to the LLC after closing. (Texas) Guessing I need to see an attorney???
Getting a loan in your name is normally MUCH cheaper than getting it via commercial policy because it is much easier for a bank to resell the former type of loan. Most people who use LLC’s take the loan in their personal name on a property in their personal name. The primary roadblock is the “Due on Sale” clause, meaning that the bank can call the loan due when the deed goes into the LLC’s name. It is rare in practice for a bank to make an issue of the DoS, though it does periodically happen. I and others have written plenty on both utility of LLC’s and DoS issues - a search will turn up much valauble information and several opinions on this particular issue.
John Hyre
Thank you Mr.Hyre for your response. I will continue my search as I continue to educate myself for future investments.